Harman International Highlights: Q1 FY 2010 October 29, 2009

Transcription

1 Harman International Highlights: Q1 FY 2010 October 29, 2009 IFA Berlin 2009 Dinesh Paliwal Chairman and CEO 2009 Harman International Industries, Incorporated. All rights reserved. Herbert Parker Chief Financial Officer

2 Forward-Looking Information and Non-GAAP Financial Information Except for historical information contained herein, the matters discussed are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. One should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to (1) our ability to successfully implement our strategic initiatives, including our STEP Change cost reduction initiatives, and to achieve the intended benefits and anticipated savings of those initiatives; (2) automobile industry sales and production rates and the willingness of automobile purchasers to pay for the option of a premium audio system and/or a multi-function infotainment system; (3) changes in consumer confidence and spending and worsening economic conditions worldwide; (4) customer acceptance of our consumer and professional products; (5) the bankruptcy or financial deterioration of one or more of our major customers or suppliers; (6) the loss of one or more significant customers, including our automotive manufacturer customers, or the loss of a significant platform with an automotive customer; (7) changes in interest rates and availability of financing affecting corporate and consumer spending, including the effects of continued volatility and further deterioration in the financial and credit markets; (8) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. dollar and the euro, and other risks inherent in international trade and business transactions; (9) warranty obligations for defects in our products; (10) our ability to satisfy automotive contract performance criteria, including our ability to meet technical specifications and due dates on new platforms, at expected profit margins; (11) competition in the automotive, consumer or professional markets in which we operate, including pricing pressures in the market for personal navigation devices; (12) our ability to achieve cost reductions and other benefits in connection with the restructuring of our manufacturing, engineering and administrative organizations; (13) model-year changeovers and customer acceptance in the automotive industry; (14) our ability to enforce or defend our ownership and use of intellectual property; (15) our ability to maintain a competitive technological advantage within the systems, services and products we provide into the market place; (16) our ability to effectively integrate acquisitions made by us or manage restructuring and cost migration initiatives; (17) our ability to comply with financial or other covenants in our long-term debt agreements; (18) limitations on our ability to borrow funds under our existing credit facilities; (19) valuation of certain assets, including goodwill, investments and deferred tax assets, considering recent market conditions and operating results; (20) strikes, work stoppages and labor negotiations at our facilities or at a facility of one of our significant customers, or work stoppages at a common carrier or a major shipping location; (21) commodity price fluctuations; (22) availability of key components for the products we manufacture; (23) the outcome of pending or future litigation and other claims, including, but not limited to the current stockholder and ERISA lawsuits; and (24) other risks detailed in Harman International s Annual Report on Form 10-K for the fiscal year ended June 30, 2009 and other filings made by Harman International with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement. Also, please note that in addition to reporting financial results in accordance with generally accepted accounting principles in the U.S. ( GAAP ), we routinely report certain non-gaap financial results. These non-gaap measures, together with corresponding GAAP numbers and a reconciliation to GAAP, are contained in our earnings press release and are posted on Harman s investor relations website. We do not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP Harman International Industries, Incorporated. All rights reserved. Page 2

3 Group Overview Last 12 months through Q1 FY10 Core Businesses LTM Rev ~$2.8 B 10,000 Employees Automotive Infotainment Automotive Audio Professional Audio Consumer Audio Global Leader Global Leader Global Leader Niche Player Navigation, Multimedia Telematic & Connectivity for a premium driving experience $1,520M Branded audio for high quality automotive sound installed by OEMs $447M * * Automotive Division* $1,967M * Pro-forma estimates, infotainment includes QNX 2009 Harman International Industries, Incorporated. All rights reserved. Audio and networking for recording/ broadcast, sports and entertainment Professional Division $473M Audio, video, storage and multimedia products for the home and on the go Consumer Division $339M Page 3

4 Awarded Business Highlights Over $2 Billion in Newly-Awarded Business in FY 2010 Selected by BMW AG to provide next generation highend Professional infotainment system for all of its new platforms including BMW, Mini & Rolls Royce Selected by Daimler AG to provide next generation COMAND infotainment system for the automaker s new Mercedes Benz S-Class and C-Class models Breaking News Selected by Toyota to provide Harman next-generation, scalable infotainment for its vehicles sold in Europe beginning in We will also provide our premium JBL branded audio for 4Runner and Land Cruiser in the US, Europe and Middle East 2009 Harman International Industries, Incorporated. All rights reserved. Page 4

5 Group Financials Q1 FY10 Operational Excellence Leads to Profitability in First Quarter Three Months Ending September 30, 2009 Harman Intl. Automotive Professional Consumer Q1 10 Q1 09 Change Q1 10 Q1 09 Change Q1 10 Q1 09 Change Q1 10 Q1 09 Change Sales EBIT (13%) (12)% (14%) n.m n.m (18%) 1 (1) (17%) n.m. Q4 09 to Q1 10 Sequential Harman Intl. Automotive Professional Consumer Q1 10 Q4 09 Change Q1 10 Q4 09 Change Q1 10 Q4 09 Change Q1 10 Q4 09 Change Sales EBIT % % (2)% (34) n.m. 1 (25) n.m % 1 (8) 20% n.m. Quarterly Sequential Improvement in Sales & Profitability Note: All EBIT figures are non-gaap and exclude 2009 Harman International Industries, Incorporated. All rights reserved. restructuring & goodwill charges; n.m. = not meaningful Page 5

6 Group Financials Consecutive Quarters of Top & Bottom Line Improvement Revenues $M Q32009 Q42009 Q12010 Operating Earnings $M Q32009 Q42009 Q Harman International Industries, Incorporated. All rights reserved. Page 6

7 Automotive Technology and Innovation Flawless Project Execution Earns Customer Confidence RNEG Mid PCM3 High S-Class Facelift 3G Low-High E-Class Mid More than $10 billion in awarded business. Largest for any supplier! Rüko Mid W200 High PCM3.1 High VI High NTG3 High C-Class Mid Genesis High NG4 High PCM2.0 High RER High REN/REU L6 High FY 05 FY 06 FY 07 FY 08 FY 09 2 launches 0 launches 2 launches 7 launches 6 launches 13 New SOPs 2009 Harman International Industries, Incorporated. All rights reserved. Page 7

8 Automotive Division Awards & Achievements Unparalleled Technology & Execution Generate New Awards Awarded new multi-year business to supply next-generation infotainment systems for Mercedes S-Class and C-Class vehicles. Awarded new multi-year business to supply next-generation infotainment systems for all BMW car models Awarded new multi-year business for Harman scalable, next-generation infotainment on vehicles sold in Europe and JBL branded audio on 4Runner and Land Cruiser models in US, Europe and the Middle East Started Harman/Kardon branded audio system production on the nextgeneration Subaru Tribeca model. Conducted formal global launch and customer previews for scalable, next-generation infotainment architecture Exhibited at the Frankfurt International Auto Show, including Harman displays in the BMW, Ferrari, Mercedes-Benz, MINI, Peugeot and Navteq booths 2009 Harman International Industries, Incorporated. All rights reserved. Page 8

9 Professional Division Awards & Achievements Professional Audio Systems Earn Venue & Artist Loyalty Harman Pro awarded contracts to provide audio systems for seven key venues at the 2010 Commonwealth Games in India Harman Pro awarded contracts for audio systems at all four major venues for Expo Shanghai 2010 Harman accepts an invitation from The Recording Academy for multi-year role as Official Sound Partner to the legendary GRAMMY Awards. Company is recognized for its decades of important technical contributions to the music industry Studer unit awarded major contract for more than 80 digital audio mixing consoles by the BBC, the world s largest broadcasting corporation Harman s HiQnet System Architect 2.0 honored at the PLASA trade show by Installation Europe and Pro Sound News Europe magazines Harman Pro systems support leading artists and venues including Deep Purple, Eric Clapton and Steve Winwood, House of Blues, Marcus Theaters, American Airlines Arena, Georgia Tech Stadium, and the Darmstadt National Theater 2009 Harman International Industries, Incorporated. All rights reserved. Page 9

10 Consumer Division Awards & Achievements Innovative Consumer Products Drive Brand Penetration Launched numerous new products and new dealer-focused strategy at IFA Berlin 2009, the world s largest marketplace for consumer electronics. More than $30 million in show-related orders received. New interactive, multimedia Web sites launched for JBL and Harman Kardon brands as part of a group-wide brand architecture initiative to energize the power of these Harman super brands JBL SAS-100 wins Japan s Good Design Award, one of the world s most prestigious designations for industrial design JBL/Roxy headphones are featured as must have products by ABC Good Morning America and Life & Style Weekly Magazine AKG Headphones K420 and K450 earn the international red dot award and collect more than 19,000 followers in one month from the Facebook community Harman Kardon HK990 earns the prestigious 2009 EISA Award for Amplifiers from the European Imaging and Sound Association 2009 Harman International Industries, Incorporated. All rights reserved. Page 10

11 QNX Software Awards & Achievements Leading-Edge Software Solutions Open Up New Markets QNX wins the prestigious Adobe MAX competition for innovative software applications in the Mobile category QNX becomes the first automotive software supplier to join the Open Screen Project for rich, interactive applications QNX CAR Platform Introduces Google Local Search, Virtual Mechanic, and Application Store Technology for automotive applications QNX adds OpenClovis Application Service Platform middleware for real-time solutions in networking, defense, and aerospace Power Transmission and Distribution provider AREVA selects the QNX operating system for protection and control systems in high voltage substations 2009 Harman International Industries, Incorporated. All rights reserved. Page 11

12 STEP Change Update, June 2008 Sep 2009 Savings One-time Investments Target =197 Actual =243 FY'11 Target: Target = 109 Actual =86 FY'11 Target: Divisional Savings: Status to Date Corp. Pro. Cons. Auto Functional Savings: Status to Date SG&A Engineering M anufacturing & So urcing Target Target to Date Actual Actual to Date FY Target Target to Date Actual to Date FY 2010 Target 2009 Harman International Industries, Incorporated. All rights reserved. Page 12

13 Liquidity and Financial Management Ample Liquidity to Capitalize on Growth Opportunities $540M cash and cash equivalents as of Sept 30, 2009 No near-term debt maturities Revolving credit facility ($232M), maturity December 31, 2011 $400M convertible note (1¼%), maturity October Harman International Industries, Incorporated. All rights reserved. Page 13

14 Summary Strong Foundation for Sustainable & Profitable Growth First quarter operating income turns positive, excluding non-recurring items Improved market conditions contributed to sequential sales growth Total awarded automotive business exceeds $10 billion More than $2 billion in new orders from BMW, Daimler and Toyota in Q1 STEP Change cost-savings ahead of target $243 million permanent savings as of September 30, 2009 Leading-edge innovation driving growth and market opportunity Scalable, next-generation infotainment system successfully introduced in Q1 and first award received Strengthening position in emerging markets Plant capacity doubled in Hungary; major customer events in China, India and Korea Adequate liquidity to execute our plans Cash and cash equivalents $540M as of September 30, Harman International Industries, Incorporated. All rights reserved. Page 14

15 2009 Harman International Industries, Incorporated. All rights reserved. APPENDIX

16 Group Overview Value Proposition Market Leader in Infotainment, Consumer and Pro Audio Best-in-class designer and manufacturer of audio and infotainment products Innovation leader 16 respected and legendary brands Successful delivery of 13 new infotainment platforms in Manufacturing scale across developed and emerging markets Deep and broad global distribution capabilities Geographically diversified global customer base Comprehensive $400M STEP Change permanent cost-savings program ahead of schedule Significant growth potential from new technology applications, penetration of new infotainment markets and high-opportunity emerging markets Battle-tested management with restructuring and turnaround experience 2009 Harman International Industries, Incorporated. All rights reserved. Page 16

17 Group Overview Geography Global Revenue Distribution by Division* FY09 Automotive Division 42% 13% ROW Americas Europe 45% Professional Division Consumer Division 44% 29% 31% 21% Americas ROW Americas ROW Europe Europe 27% 2009 Harman International Industries, Incorporated. All rights reserved. *Pro-forma estimates by end market 48% Page 17

18 Automotive Technology and Innovation Roadmap to Accelerate Market Leadership 1 Next-generation high infotainment system architecture 2 Scalable, next-generation infotainment system serves broader market 3 Open standard based media bus technology 4 Advanced solutions for hybrid and electric vehicle segments 5 Leader in next-generation navigation capabilities 6 Unparalleled audio technology leadership 2009 Harman International Industries, Incorporated. All rights reserved. Page 18

19 Automotive Technology and Innovation 1 Next-generation High Infotainment System Architecture Infotainment platform evolution 2000 features 2.5M lines of code 2500 features 3.5 M lines of code Infotainment features and complexity Transition from hardware to softwarecentric model SH4/512MB/1024 Intel Atom/1GB MoCCA & DSI 2.0 MoCCA Framework QNX CAR Platform 200 features; ~250K lines of code SH1/16MB Tuner/CD/Navi Turn-by-Turn SH3/32MB MMI2000 VxWorks Tuner/CD/DVD Phone/SDS MOST25 2D/2.5D Map QNX CAR Platform Tuner/CD/DVD Phone/SDS MOST50 3D Map Internet Connectivity Tuner/CD/DVD/Bluray Phone/SMS/ MOST150 NDS Navigation Enhanced 3D Map Internet Connectivity Harman is at the forefront of premium infotainment system evolution The most integrated system platform in the industry 2009 Harman International Industries, Incorporated. All rights reserved. Page 19

20 Automotive Technology and Innovation 2 Scalable, Next-Generation Infotainment System Launched ~ $5 billion new market opportunity Complete infotainment features at competitive price Target Upper & Lower Mid segments More advanced features than competition Voice recognition Video playback Dynamic user interface Internet connectivity Leverage partnerships in High system New system launched Fall Harman International Industries, Incorporated. All rights reserved. Page 20

21 Automotive Technology and Innovation 3 Leading Next-Generation Media Bus Technology Open standards solution for audio video network at reduced cost Ethernet AV Consortium Key AVnu alliance members Delivers performance required for future systems Harman is prototyping solutions for Automotive and Professional audio markets Harman is founding member of the AVnu Alliance 2009 Harman International Industries, Incorporated. All rights reserved. Page 21

22 Automotive Technology and Innovation 4a Advanced Solutions for Hybrid & Electric Car Segments GreenEdge Energy Efficiency initiative to reduce power consumption Collaboration with Intel and Texas Instruments to develop low-power solutions System software design based on QNX CAR for run-time power efficiency Aligned with Harman high-efficiency, high-performance audio amplifier system Active Noise Management solutions for hybrid, electric and conventional vehicles through exclusive partnership with Lotus Engineering 2009 Harman International Industries, Incorporated. All rights reserved. Page 22

23 Automotive Technology and Innovation 4b Technology Innovation for Market Growth High Efficiency Audio Systems HiE PDR Super high efficiency reduces power consumption by up to 75% Ideal solution for Hybrid and Electric vehicles Shown in the Prius at the Palms at CES Uses new HiE high efficiency speakers High efficiency Powered by Crown Class D power amplifier Noise Management Solutions Engine sound synthesis for electric & battery cars Address impending legislation on pedestrian safety Customized interior engine sound for hybrids Active noise cancellation for refined cabin sound Reduce weight and CO 2 emissions 2009 Harman International Industries, Incorporated. All rights reserved. Page 23

24 Automotive Technology and Innovation 5 Leader in Next-Generation Navigation Technology Textured city maps for 3D rendering of city buildings and landmarks Fuel-efficient route calculation Incremental updates of navigation data (PSI initiative) Integration of navigation technology with camera image processing 2009 Harman International Industries, Incorporated. All rights reserved. Page 24

25 Automotive Technology and Innovation 6 Harman is the World Leader in Branded Audio Key Points 45% market share of worldwide market Used in over 200 car platforms by 12 OEMs Shipping over 2 million audio systems annually Broad portfolio of technologies to meet full market requirements Geographical growth, new technologies, & emerging high end systems Others 30% Market Share Harman 45% Bose 25% 2009 Harman International Industries, Incorporated. All rights reserved. Page 25

26 Professional Division Overview No. 1 in Global Professional Audio Market Share Brands / Technologies Market Position Customers Microphones Headphones Digital Signal Processing Digital Amplification Digital Signal Processing #1 Installed Sound #1 Portable PA #2 Recording & Broadcast Speakers Digital Signal Processing Mixing Consoles #1 Tour Sound #2 Musicians Proprietary Systems Protocol #1 Cinema Sound 2009 Harman International Industries, Incorporated. All rights reserved. Page 26

27 Consumer Division Overview Premium Niche Solutions for Home, Mobile & Multimedia BRANDS HOME MOBILE MULTIMEDIA 2009 Harman International Industries, Incorporated. All rights reserved. Page 27

28 Operational Excellence Strategic $400M STEP Change Cost Savings Program Structural Changes Reduced Overhead Cost Operational Excellence Involves all business divisions Disciplined approach with online tracking of Key Performance Indicators and milestones $400 million permanent savings targeted by end of FY11 Program focus: Organizational Simplicity (e.g. realizing synergies between divisions) Supply Chain Excellence (e.g. design excellence, consolidating suppliers and leveraging global purchasing power) Footprint Optimization (e.g. optimizing engineering and production sites, consolidating locations and leveraging global cost) 2009 Harman International Industries, Incorporated. All rights reserved. Page 28 28

29 AKG, Becker, Crown, dbx, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson, QNX, Soundcraft and Studer are trademarks of Harman International Industries, Incorporated, registered in the United States and/or other countries. GreenEdge and HiQnet are registered trademarks of Harman International Industries, Incorporated. All other marks are the property of their respective owners Harman International Industries, Incorporated. All rights reserved.